February 5, 2018 / 2:39 PM / in a year

CORRECTED-TREASURIES-Selloff pauses after yields hit four-year highs

 (Corrects yields to highest in four years in headline and first
    * Ten-year yields highest since Jan 2014
    * Fed seen more aggressive on rate hikes
    * Treasury to sell $66 billion notes, bonds this week

    By Karen Brettell
    NEW YORK, Feb 5 (Reuters) - U.S. Treasury yields recovered
from almost four-year highs reached overnight on Monday as
investors weighed whether a dramatic week-long selloff had run
its course, after improving economic data raised expectations of
further rate hikes this year.
    Benchmark 10-year note yields             surged to 2.885
percent overnight, the highest since January 2014, following
data Friday that showed hourly wages rose in January.             
    They fell back to 2.841 percent in morning trading in New
    Signs that inflation is firming have raised some traders'
expectations that the Federal Reserve may hike interest rates
four times this year. Fed officials have indicated that three
rate hikes are likely.
    Many investors are reluctant to stand in the way of the
selloff, which has sent the 10-year yields up from a low of
2.654 percent last Monday, until they see signs of
    “Even if you think it’s gone too far, or even if you think
we’ve sold off a little more than probably warranted at this
point, you don’t really have those buyers that are willing to
step in and stop it until we see some signs of slowing,” said
Blake Gwinn, an interest rate strategist at NatWest Markets in
Stamford, Connecticut.
    Declining equity markets in tandem with weaker bonds as
economic growth improves also indicate nervousness about U.S.
central bank policy.
    “This is typically the dynamic you see when it's about Fed
expectations,” Gwinn said.
    With no major economic releases due this week, attention
will turn to supply and speeches by regional Fed presidents.
    The Treasury will sell $66 billion in notes and bonds this
week, including $26 billion in three-year notes on Tuesday, $24
billion in 10-year notes on Wednesday and $16 billion in 30-year
bonds on Thursday.             
    Fed speakers include St. Louis Fed President James Bullard
on Tuesday, and New York Fed President William Dudley, Chicago
Fed President Charles Evans and San Francisco Fed President John
Williams on Wednesday.
    Dallas Fed President Robert Kaplan, Minneapolis Fed
President Neel Kashkari and Kansas Fed President Esther George
are also due to speak on Thursday.

 (Editing by Bernadette Baum)
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